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Thursday, 8 June 2017

Mr Justice Birss' judgment didn't solve the AmeriKat'sjet lag problem, but the Annex to his judgmentcertainly did the trick...

Jet lag is a wonderful thing. It means you can catch up on your neglected judgment reading in the hope that at least one of them will lull you asleep. Well, Mr Justice Birss, you failed jet-lag sufferers and insomniacs everywhere. Yesterday morning's second instalment in the Unwired Planet v Huawei FRAND dispute was a page turner introducing a new type of IP injunction - a FRAND injunction. With Huawei having not engaged with the terms
of the worldwide licence during the main trial (and at the time of the final
judgment), the question of an injunction was left over to be decided at a
separate hearing. That hearing came, as
promised by the judge, after the Easter break ending with today's decision [2017] EWHC 1304.

The Court decided several issues. The AmeriKat focuses on the biggest – the newly anointed FRAND injunction.

To grant a final injunction or to accept Huawei’s belated undertakings…

Because Huawei had made clear that they were not prepared to enter into a global licence on the basis that such a global licence would not be FRAND as a matter of competition law, the Court had no draft terms ready to go pending the Court’s final decision. As matters transpired, the judge ultimately held that a global licence was FRAND (together with other terms – "the Birss J licence"). So, the question of the injunction was to be held over (i.e. determined another day). This plainly irked the judge who commented:

“I had made it at clear as I could to the parties during the trial that the trial itself was the hearing at which the question of whether or not to grant an injunction was to be decided.” (see also [13])

UP argued that a final injunction should be granted, but stayed pending appeal. Huawei argued that since the hand down of the main judgment circumstances had materially changed. What was the material change? Since the first judgment, Huawei offered two undertakings which were (1) that Huawei would enter into the Birss J licence or whatever licence the appellate court determined should the case go to appeal and (2) in the interim, pending appeal, Huawei would abide by the terms of the Birss J licence. Huawei argued that the judge should accept these undertakings and refuse the injunction given that under this regime UP would be protected as UP would be receiving royalties. A final injunction would serve no useful purpose. Further, the Birss J licence expires in 2020, 8 years before the valid/infringed patent expires. Having an injunction in place in 2020 would unfairly distort the positions of the parties should any renegotiation need to take place, Huawei argued. UP argued that Huawei’s position is that they continue to refuse to enter into the licence found to be FRAND by the Court - the undertakings now proposed were just being a means to escape an injunction. Further the undertakings did not provide a watertight assurance that at the end of the appeal process Huawei would inevitably enter into a licence with UP (the judge disagreed with this – see [30]).

Birss J stated that it was right for Huawei to raise the 2020 expiry point. That expiry date was agreed by the parties in the UK licence terms (which the Court worked off of when constructing the FRAND licence). The date was agreed because fixing a rate for several years (up until patent expiry, for example) involves the risk that the standard may not be worth that much in ten years’ time as technology and standards change. The judge commented:

“If patents court are to support orderly FRAND licensing of standard essential patents, as I believe they should, then a workable approach needs to be developed which allowed for these changing circumstances.”

In first deciding what the final remedy should be absent any appeal, the judge introduced a new injunction - a FRAND injunction. At [20] the judge stated that:

“A FRAND injunction should be in normal form to restrain infringement of the relevant patent(s) but ought to include a proviso that it will cease to have effect if the defendant enters into that FRAND licence. If as in this case, the FRAND licence is for a limited time, shorter than the life time of the relevant patents then the injunction should also be subject to an express liberty to either party to return court in future to address the position at the end of the term of the FRAND licence. In any case the FRAND injunction should also be subject to an express liberty to apply in the event the FRAND licence ceases to have effect for any other reason.”

This is contrary to the normal position under English law that once final relief is granted, parties are not entitled to come back to court. However, in recognizing the special nature of a FRAND undertaking, the FRAND injunction is more flexible to allow parties to come back to court at the expiry of the licence. But at this stage, the “court should not pre-judge….what should happen if or when the FRAND licence ceases to have effect”.

Mr Justice Birss emphasized the patentee’s obligation to start the process of resolving post-licence expiry conduct well in advance of the expiry.

“If the patentee has failed to start a process of FRAND negotiation well in advance of the expiry of the current FRAND licence then no doubt the court will be unsympathetic to the patentee even if no licence has been finalised to start the day after expiry.”

Turning to whether the Court should grant the injunction or accept Huawei’s undertakings, the judge held essentially it was too little, too late from a party who “maintained a determined stance that they would not accept a worldwide licence this way”. He commented that had Huawei from the outset provided “an unqualified undertaking to enter into whatever licence the court (including an appellate court) had decided was FRAND, then an injunction at this stage would not have been appropriate." This course of conduct forced UP to come to court and vindicate its rights – a favorite pastime of rights holders as noted at [26]. “The right thing to do now is grant a FRAND injunction albeit one which will be stayed on terms pending appeal.”
….and everything else

And what about the other points?

What should the declarations be? The parties agreed that declarations should be made – including two that were agreed. These were that various UP and various Huawei offers were not FRAND. The declaration about the Birss J licence terms was disputed. In the end the judge ended up with the declaration that “the licence annexed to the judgment represents the FRAND terms applicable between the parties in relevant circumstances”.

Costs: Huawei argued that there should be no order for costs given that it was an unusual trial and it was not realistic to identify a single overall winner. However, by the end the judge settled on an interim payment of 2.9 million. More on that later if the AmeriKat feels inspired to weave her way through a costs judgment…as important as they are.

Permission to Appeal: Appeal was granted to Huawei on the global licensing issue, hard edged non-discrimination and on Huawei v ZTE. Appeal was granted to UP on the blended global benchmark rate. More on that later.

So there you have it. A cool, new flexible custom made FRAND injunction from the Patents Court, together with a full FRAND licence agreement annexed to the judgment for the world to pour over (which despite the AmeriKat's jest is really exciting as those terms are often shrouded in mystery).

So far this year Mr Justice Birss has paved the way on setting FRAND rates and creating a new type of injunction, Mr Justice Arnold has been blasting his way through SPC cases (with a couple of CJEU referrals to boot) and Mr Justice Carr has developed the new Fujifilm Declaration. Not bad for the first six months of 2017.

You quote Mr Birss eleven times in your post, and he even made it into the title. Looks like brown-nosing to me. No wonder UK judges become big-headed. Really, it is the judgement that counts, not the one who wrote it.

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